Some Interesting Surprises Hidden In Your Insurance Policy

It’s that time of year again … I’m reading through all of the insurance policies covering our businesses, houses, etc.  There are some interesting surprises, as always, and I’m guessing a lot of the provisions apply to most of your reading this, as well.  We utilize several different insurance companies, each for a different purpose.

When it comes to homeowner insurance, just look at these surprising facts:

• Did you know that if a nuclear weapon is accidentally discharged and your home is destroyed, your homeowner insurance policy will not cover your loss, your property is worthless, and you still owe the mortgage? That is, of course, unless the nuclear explosion causes a fire outside of the detonation area, the fire spreads, and your house is destroyed.  Then, you would be covered under the fire section of your insurance policy.
• If an insurrection, rebellion or revolution occurs (such as the so-called Tea Party Patriots trying to overthrow a government building in Oklahoma), your house would not be covered?
• Money, which includes gold and silver, is only covered up to $200.  So if you have a single Troy ounce of gold at home, which now has a market value of $1,087.50, you would lose the entire investment.  (Why would someone keep gold or silver at home, anyway, unless you believed in conspiracy theories?)
• Silverware is limited to $2,500 for the household.  Those of you with Tiffany & Company serving sets, then, are out of luck.  You would maybe get four place sittings worth of coverage.   As for your serving spoons and additional guests … sorry!
• Floods are not covered without a special insurance policy issued by the United States Government.  More than 25% of floods occur in areas that have no flood history and are not expected to flood.
• Earthquakes are not covered.  Given that the worst fault in North America runs between Missouri, Kentucky, Tennessee, Arkansas, and the like in the form of New Madrid, I doubt most of the people living in, say, St. Louis have coverage.  The insurance companies know this.  These people are going to pay decades of premiums and when it goes off again, lose their home but be stuck with the mortgage.

The businesses, on the other hand, have completely different considerations.  In the case of Mount Olympus Awards, we are covered by Nationwide, a mutual insurance company headquartered in Columbus, Ohio.

I do understand why as a company gets larger and larger it becomes necessary to have private attorneys negotiate insurance coverage.  I started thinking about the day when you had a publicly traded business with a $200+ million market capitalization … you would need to make sure every contingency is covered and then negotiate the premium because it is mostly likely going to be placed in the facultative insurance market; standard insurance policies, these are not.

For now, our businesses are simple so that is not an issue.  But as we grow, and become a true holding company, picking up operations, acquiring other businesses, and taking on external directors, our insurance needs are going to become increasingly complex.  I just can’t wait for the day when we own an insurance company.  It is my favorite business in the entire world.  Statutory accounting vs. GAAP is a gold-mine of information.  Deferred policy acquisition cost amortization makes my heart sing.  You don’t have to get it.  I don’t understand people who want to buy NBA teams.  (NFL teams I get … I’d buy one of those.)

Related posts:

1. The Kennon Retirement Insurance Plan
2. I Will Probably Add Shares of Nestle to the Retirement Insurance Plan (But They Still Seem Overvalued)
3. New Stocks and Cash Added to The Kennon Retirement Insurance Fund (or “Stupid Fund”)
4. An Interesting Observation from Aaron
5. An Interesting Bit of Nostalgia from My Childhood …
6. Interesting Political Fact on Taxes
7. Interesting Day Both for Our Businesses and the Stock Market